Managers’ Cognitive Biases in Decision Making: Revisiting an Effective Method

Managers are generally faced with important decisions; their decisions have a great effect on the success or failure of an organization. However, managers have limited ability and may be affected by several cognitive biases that can cause errors in their judgment and solutions. In this study, 43 biases related to managers’ decision-making are identified and explained. Since it has been tried to recognize all the effective biases in managers’ decision-making in an integrated manner, continue advancing in the literature on this topic is important. The solution proposed in this study to reduce managers’ biases is the collective decision-making method. The study aims to investigate the impact of collective decision-making on reducing 43 identified biases. To do so, 152 managers of Iranian state-run organizations (at different management levels) who know about collective decision-making are surveyed. The analysis of One-sample statistics and t -test statistics shows that collective decision-making can reduce 40 biases in the three parts of judgment, preference, and decision results, but only the “shared information bias†isn’t reduced and we can’t comment on the two biases of “herd behavior†and the “bandwagon effect.†The theoretical implications of this study are the recognition of all the biases that may affect the decisions of a manager, and its managerial implications are the introduction of the collective decision-making method as an effective method to reduce the possible biases of managers’ decisions. It is important to use this method because it is easy and inexpensive and can avoid many damages and mistakes.